We bring you our regular Monday commentary on the economic events that affected our trading in the past trading week.
The beginning of the week (23 November) saw data from the UK, which brought changes to the Purchasing Managers' Index (PMI) for October 2021. In general, there were no major increases or decreases from previous readings. However, they were largely more positive than expected.
The main topic last week was the decision to change interest rates in New Zealand. As expected, the Reserve Bank of New Zealand (RBNZ) raised the cash rate by 25 basis points to the current level of 0.75 %. The Committee agreed that it remained appropriate to continue to reduce monetary stimulus to maintain price stability. A range of economic indicators demonstrate that the New Zealand economy is performing above its potential.
The RBNZ Governor, Adrian Orr, said at the meeting that a 25 basis point hike provides more options, but we need to be cautious given the huge debt.
In response to this news, the NZD started to react a little differently than we would have expected. In the second half of the week, it was weakening... This is probably due to the fact that the RBNZ was not hawkish enough. A rate hike was expected and Orr's rhetoric was rather balanced when he mentioned the huge debt.
On the same day (24 November) came the GDP data from the USA. The quarterly result came out significantly negative from the previous 6.7 % to 2.1 1 %.
In the first half of the week, the markets behaved somewhat normally and in their standard manner. However, this was disrupted by the major news of the spread of a new mutation of Covid from South Africa, which many experts consider to be a threat. Countries such as Italy, Germany and Japan tightened controls at airports and banned entry to travellers from South Africa.
The markets reacted to these "shocks" in a rather confused manner. In any case, we will watch how the situation develops and wait to see what trend the markets take.
What's in store for the current trading week?
Apart from the aforementioned monitoring of events regarding the new spreading mutation of the virus, we will turn our attention in the current trading week to Wednesday's data coming from the Eurozone (CPI) and to NFP coming from the US.